[Marxism] A new gilded age
lnp3 at panix.com
Mon Mar 6 07:52:35 MST 2006
from the March 06, 2006 edition -
What a new 'gilded age' may bring
By David R. Francis
It's an odd phenomenon. Before Memorial Day in May, the Senate Republican
leadership plans to have a go at repealing or minimizing the estate tax -
the "death tax," as they like to call it. Yet economist after economist
note that the only families likely to benefit are billionaires and
multimillionaires, and that both income and wealth in the United States are
increasingly being concentrated at the top.
Some warn that by its actions, Washington is contributing to an economic
climate that is leading to less tolerance, greater xenophobia, and more
inequality in political representation.
The richest 1 percent of Americans now get about 15 percent of total US
income, close to the 18 percent the same small group had in 1913. In a way,
the days of the robber barons, the tycoons, and the Gilded Age are back -
after the Great Depression, World Wars I and II, and progressive taxation
had trimmed their share to 8 percent in 1963.
In contrast, the vast majority of American incomes have not kept up with
inflation for the past six years.
"It's very troubling," says Benjamin Friedman, a Harvard University
economist. "Inequality by some measures is very high by historical standards."
Undoubtedly the rich, with their fat investment portfolios, were hit by the
bursting of the stock-market bubble at the start of this century. The Bush
tax cuts alleviated some of that pain.
Nonetheless, the market collapse did not stop the trend of the past 25
years toward greater income inequality. A recent Congressional Budget
Office report shows that, between 1979 and 2003, the top 1 percent of
households enjoyed a 129 percent gain in after-tax income after inflation.
That compares with 15 percent for the middle one-fifth of all households
and 4 percent for the bottom fifth.
So much of the fruits of economic productivity growth from 1966 to 2001
went to the top 10 percent that little was left for the other 90 percent,
notes a new paper by Northwestern University economist Robert Gordon and
student Ian Dew-Becker. Productivity is the source of growth in real
This research also shows that the richest of the rich, the top 1/1,000th,
enjoyed a 497 percent gain in wage and salary income between 1972 and 2001.
Those at the 99th percentile, who made an average $1.7 million per year in
2001, enjoyed a mere 181 percent gain.
A recent visitor to Antigua saw one consequence of this income shift: a row
of 80-foot American-owned yachts lined up at a wharf. One of a dozen crew
members on one ship said the owner only came aboard for about two weeks in
the winter and again in summer - when the yacht is docked in southern France.
The New York Times recently reported a boom in building mega-yachts, some
as long as a football field. Big yachts have multiplied from 4,000 a decade
ago to 7,000 now. Only a few slips can accommodate the biggest boats, each
of which can cost $200 million. (Many boat owners use tax breaks, some
provided in a 2003 tax bill, to slash costs.)
Most Americans still believe in their own potential to climb the income
ladder. But growing income inequality still worries Edward Wolff, an expert
at New York University: "It makes our democracy very fragile.... Eventually
the American people are going to catch on. Politically it is going to
create a major backlash." He's not predicting revolution, rather
Dr. Friedman, author of an excellent new book, "The Moral Consequences of
Economic Growth," agrees.
Here are some consequences the two economists and others foresee:
The white middle class may grow less tolerant of affirmative action and
other efforts to help minorities - African-Americans, Hispanics, and Asians.
Reflecting public opinion, Congress could shrink programs for the poor.
Efforts to limit immigration, already growing, could expand further.
Reactionary politicians could win more votes and offices.
The class system in the country could become more rigid. As it is,
because education is primarily paid by property taxes, children in wealthy
communities get a better education than those living in poor towns. For
children, education is a prime determinant of future income and class.
Recent economic research finds that income mobility has already declined in
With their wealth, the new "oligarchy" could maintain excessive influence
in Washington through campaign contributions and support for lobbyists.
It could make the political system more unfair, says Professor Wolff.
Some economists blame the concentration of wealth and income on extremely
high pay for some CEOs, entertainment celebrities, sports stars, and Wall
Street financiers - the "working rich," as they are dubbed. At the bottom,
deunionization and globalization have depressed wages. Progressive taxation
no longer restrains wealth much.
University of Texas economist James Galbraith attributes most of the rising
income inequality, at least through 2000, to soaring stock prices. Some new
wealth, he suspects, may not be as willing as old wealth to leave money to
charitable foundations. So ending federal estate taxes, if it happens, may
also wither the philanthropic culture that has done so much for the nation.
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